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    ASIAIR > College of Management > Department of Finance > Proceedings >  Item 310904400/63694

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    Title: The valuation and analysis of mortgage insurances with the cyclical property of housing prices
    Authors: Chao-Chun Chen, Shih-Kuei Lin,Wen-Shih Chen
    Contributors: Department of Finance, Tunghai University, Department of Money and Banking, National Chengchi University
    Keywords: Mortgage insurance;Markov regime-switching;Option pricing
    Date: 2012
    Issue Date: 2013-08-07 09:27:26 (UTC+8)
    Publisher: Department of Finance, Tunghai University,
    Department of Money and Banking, National Chengchi University
    Abstract: This research rst re nes the pricing formula for mortgage insurance (MI) con-
    tracts proposed in Bardhan, Karapand za, and Uro sevi c (2006) based on a modi ed
    contract whose setting is closer to reality. Since housing prices are usually observed
    to be cyclic in the mean growth rate and volatility due to economic
    our research further extends this modi ed MI pricing formula by taking into con-
    sideration the state-dependent property behind housing prices. Empirical analysis
    shows that the fair premium estimated with the state-dependent property for the
    U.S. market is higher than that when ignoring this property at the end of 2010.
    It indicates that incorporating the cyclical property in valuing MI contracts may
    facilitate to lessen the losses for mortgage insurers in the U.S. market, in which
    these companies operated at a loss during this period. By comparing the market
    premiums and fair premiums calculated from the proposed model, we nd evidence
    that the high-risk MI insured is largely subsidized by the low-risk insured in the
    U.S. market.
    Relation: 2012中部學術財金研討會 論文發表
    Appears in Collections:[Department of Finance] Proceedings

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